Tuesday, October 27, 2015

B&E | India Leads As Best Investment Destination with Ifs and Buts : Ernst & Young

One of the
world’s top consultants, Ernst and Young (EY), known for catering to the
“requirements” of its clients who include both government and global business
players, has rated India as the best investment destination in the world. In a
survey carried out among 505 business executives from 28 countries, E&Y has
said “A leading 32 per cent of the investors ranked India as the most
attractive market this year.”

Titled “EY’s
attractiveness survey India 2015: Ready, set, grow”, and brought out ahead of
Prime Minister Narendra Modi’s scheduled visit to the United Kingdom (UK) in
November second week, EY survey finds that less than half the “decision makers”
that of India – just about 15 per cent – considered China as the as the most
best investment destination.

This is followed
by Southeast Asia 12 per cent), Brazil (5 per cent), North America (10 per
cent), Latin America (3 per cent), the Middle East (four per cent), Western
Europe 4 per cent, Japan 3 per cent, and Russia 1 per cent. The survey was
carried out with the help of business executives, government leaders, and EY
professionals.”

The main issues
addressed in the survey included whether labour costs, domestic market,
macroeconomic stability, labour skills, stable political and social
environment, research and development availability, FDI policy, ease of doing
business, flexibility in labour law, and so on.

Impact of
India's economic reforms on attracting FDI

An earlier World
Bank report, which also ranked India as the best business destination, had
specifically mentioned that it had taken the help of the Department of
Industrial Policy and Promotion (DIPP), Government of India, for preparing the
report. While, the EY report refrains from saying any such thing, two of its
top commentators are Amitabh Kant, secretary, DIPP, and S Jaishankar, India’s
foreign secretary.

It is, however,
well known that EY was one of the topmost clients of the Gujarat government
under the chief ministership of Narendra Modi, and promoted Gujarat’s
high-profile biennial Vibrant Gujarat global investment summits worldwide
between 2003 and 2013, dishing out propaganda material and organizing meetings
with business executives for Modi.

He adds, “We’ve
seen a sharp turnaround in FDI in 2014. After declining for two successive
years, investment in India has bounced back with a 32% growth to US$25b —
significantly ahead of the 7% growth in FDI seen globally. Further, with FDI
capital inflows of US$30.8b during the first half of calendar year 2015, India
has emerged as the number one FDI destination in the world.”

In the chapter,
“FDI in India: A V shaped recovery”, the report, however, admits, that India is
still below the 2011 in FDI investment level. It says, “Though still far below
the 2011 peak, the number of FDI projects rose 37% in 2014, with a proportional
increase in jobs created by FDI.”

“The upturn
marks a significant change from 2012 and 2013, when slow economic growth,
regulatory hurdles, lack of transparency and policy paralysis had deterred
investors. Investor confidence in India has been strengthened by improving
economic growth and investor-friendly moves by the new Government”, the report
points out.

However, there
are still issues, it indicates: “Investors have generally been cautious. In
2014, the average project involved an investment of US$37m, compared with
US$40m in 2012 and US$53m in 2010. Investors are positive but wary and keen to
see real improvements in the business environment.”

“The uptick in
FDI projects into India contrasts with a 3 per cent slide in the number of FDI
projects worldwide, while it outpaced the 17% rise across the Asia-Pacific
region. After a steep fall in 2013, FDI in manufacturing grew at its fastest in
seven years”, the report says, adding, “In 2014, investors announced plans to
invest a total of US$11.4b in 192 FDI projects, creating more than 67,000
jobs.”

The survey found
that of the 505 business executives interviewed, 55 per cent were aware of the
Make in India programme. However, it regrets, “There is a need to create
visibility for the campaign among non-established players, as only 10 per cent
of those without a presence in India were aware of it.”

This article was first published at CounterView.com on October 23, 2015 under Creative Commons License 4.0